The turtorials and instruction book for your calculator ...
The turtorials and instruction book for your calculator make some easy calculations very difficult. If you do one or two additional steps, it all becomes easy.
First, some basics
The third line of the calculator is the one we will be using the most.
N is the number of compounding periods
I/Y is the interest rate per compounding period
PV is the present value
PMT is the payment per period
FV is the future value
To set your decimal points
2nd Format (bottom middle key)
Enter number of decimal points you want to use.
Enter (top line second key)
Future Value Problems
How much will I have in the bank in 1 year if I put $100 in today, bank pays interest at 10% compounded annually?
1) 2nd clr tvm
2) 100 PV
3) 1 N
4) 10 I/Y
5) CPT FV FV = -110.00
How much will I have in the bank in 1 year if I put $100 in today, bank pays interest at 10% compounded semi-annually?
1) 2nd clr tvm
2) 100 PV
3) 2 N
4) 5 I/Y
5) CPT FV FV = -110.25
Present Value Problems
What is the present value of $1,000 to be paid to me in 2 years, bank pays interest annually at 10%.
2nd CLR TVM
1000. FV
2 N
10 I/Y
Cpt PV -826.45
What is the present value of $1,000 to be paid to me in 2 years, bank pays interest of 10% semi-annually?
2nd CLR TVM
1,000 FV
4 N
5 I/Y
Cpt PV -822.70
Payments
You want to buy a new car. The cost is $50,000. You make 5 equal annual payments which include interest at 10%. How much are the payments?
2nd CLR TVM
50,000 PV
5 N
10 I/Y
Cpt PMT -13,189.87
What would the payments be if they were monthly?
2nd CLR TVM
50,000 PV
5X12 = N
10/12 = I/Y
Cpt PMT -1,062.35
Differential Interest
Bob will sell you a DooDad for $10,000 payable in 3 equal annual payments which include interest at 2%. The bank would charge you 10% for the same loan. How much are you really paying for the DooDad?
2nd CLR TVM
10,000 PV
3 N
2 I/Y
Cpt PMT
10 I/Y
Cpt PV 8,623.28
How much would you pay for a 10 year, 100,000 bond, 10% interest payable annually, to earn 8% interest?
2nd CLR TVM
100,000 FV
10 N
.10 X 100,000 = PMT
8 I/Y
Cpt PV 113,420.16
You are buying a 10 year, $100,000 Note issued 5 years ago. The Note is being paid in equal annual payments which included interest at 10%. Current interest rates are 12%. The Note has exactly 5 years of payments left and you will get the first in 1 year. How much do you pay to earn 12%?
2nd CLR TVM
100,000 PV
10 N
10 I/Y
Cpt PMT
5 N
12 I/Y
Cpt PV 58,666.07
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